On December 12, 2019, the United States Court of Appeals for the Sixth Circuit (the “Sixth Circuit”) issued a long awaited decision in the dispute between FirstEnergy Solutions Corp. (“FirstEnergy”), the Federal Energy Regulatory Commission (“FERC”) and certain power purchase contract counterparties, including the Ohio Valley Electric Corporation (“OVEC”).¹ The decision helps clarify a murky area of jurisprudence and has significant implications for restructurings in the electric power sector.

On September 9, 2019, the Treasury Department and IRS issued new proposed regulations (REG-125710-18) (the “Proposed Regulations”) affecting how companies with net operating losses (“NOLs” and such entities, “Loss Companies”) will calculate the ability to use such losses following an ownership change in the wake of the Tax Cuts and Jobs Act, P.L. 115-97 (2017) (“TCJA”).

The United States Supreme Court in an 8-1 decision issued on May 20, 2019, settled a split among the Circuits in holding a debtor’s rejection of a trademark license agreement under Bankruptcy Code Section 365 did not rescind the rights of the trademark licensee under the agreement. In Mission Product Holdings, Inc. v. Tempnology, LLC, the Court adopted what is known as the “rejection-as-breach” approach, which holds that post-contract rejection a trademark licensee still retains its rights under applicable state law.

Junior creditors are often described as holding a “silent second” under standard intercreditor agreements, which address the relative rights of senior and junior creditors and the extent to which junior creditors can seek to enforce remedies without the consent of senior creditors. The increased complexity of capital structures has led to litigation over the degree junior creditors must remain silent after the borrower has commenced a chapter 11 case.

In a recent significant opinion, Judge Marvin Isgur of the US Bankruptcy Court for the Southern District of Texas held that a springing lien to senior noteholders, conditioned on the amount of iHeart notes outstanding, was not triggered where an iHeart subsidiary repurchased notes and left them outstanding past maturity.1 The Court rejected various creditor arguments that the notes were canceled as a matter of law, or that actions to avoid the springing lien entitled creditors to equitable remedies.

The Supreme Court has granted certiorari to resolve whether rejection of a trademark license in the licensor’s bankruptcy terminates the licensee’s rights to use the mark. Though Congress determined 30 years ago that holders of copyright and patent licenses would be protected from rejection, it left trademark licenses outside that safety. Circuit courts applying general rules of bankruptcy law have split on whether those rules protect the trademark licensee or leave the mark at risk, and the grant of certiorari invites a decision with important implications.

In Citibank, N.A., London Branch v Oceanwood Opportunities Master Fund and others, the English High Court recently addressed what constitutes “control” for purposes of the disenfranchisement clause ubiquitous in New York law indentures. While the Court determined that “control” is necessarily a fact-based question to be viewed in light of the particular circumstances, the judgment offers several helpful conclusions which will be good news to any lenders having or seeking control positions in note tranches.

Facts of the case

The Delaware Bankruptcy Court recently authorized the sale of La Paloma’s electricity-generating assets “free and clear” of any obligations to surrender compliance certificates under California’s Cap-and-Trade Program. The ruling confirms the viability of Bankruptcy Code section 363 sales as a mechanism to release energy-related assets from certain ongoing environmental obligations.

The decision by the Second Circuit Court of Appeals, in a 2-1 ruling,1 to vacate the rulings by the District Court of the Southern District of New York in the Marblegate dispute, reopens the traditional flexibility that companies have had for consent solicitations as part of liability management transactions, although some uncertainty may continue to persist.

Background

In a widely anticipated ruling, the Supreme Court in Czyzewski v. Jevic Holding Corp. ruled that bankruptcy courts “may not approve structured dismissals that provide for distributions that do not follow ordinary priority rules without the consent of affected creditors.” In doing so, the Court rejected the Third Circuit’s ruling that the circumstances were an unusual “rare case,” justifying deviation from the ordinary priority rules.